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Encryption death history 2020

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Keep the money, keep the chain.

"Everyone is laying out A shares."

Hearing that, I felt stuck. Two seconds later, I confirmed that my friend wasn't talking to me about the encryption market.

I looked around. The night wind made me shiver.

A lot of things have been running through my mind recently: the return of the chain of alliances, the decline of the corporate chain, the deliberately low profile of the trading platform, the regulation from all sides, the increasingly professional secondary market, the succession of departures, the cynicism towards Sythetix and the seemingly never-ending NFT token.

It suddenly occurred to me that forecasting markets seemed ancient, and DAO was no longer young. Those once ambitious slogan and exploration, seems to have become a flash in the past.

From then on, I decided to go back to the drawing board and think about all the possibilities of encryption and try to find a fulcrum that I could convince myself of.

Starting from the most basic problem, this paper attempts to criticize a kind of widespread "encryption idealism".

Node motivation

Why run a Commons node?

Under the rational person's assumption, no one would consider it economical to run a node solely for the use value of tokens.

In the standard of legal currency, the cost of node operation can be calculated, but the use value of token cannot be calculated, that is, there is no effective method to measure the practical value of all calculation and all storage on a block chain platform.

However, if the usage value is roughly equated to the real-world server cost of the entire network, we can consider:

Usage value = total network computing power cost x calculation time + total network permanent storage cost (legal currency)

Average token return of node = (block reward + handling fee) x node calculation force/total network calculation force

Therefore, under the assumption that the token does not have a secondary market, the final profit and loss of the node completely depends on whether the token can play a sufficient use value when the labor is spent, which directly depends on the network congestion. Earn tokens when the network is congested and use tokens when the network is idle, which will cost the least amount of server cost and use more computing resources on the platform. This model will make the network in and out, use and idle in a dynamic adjustment state, and finally return to general equilibrium. There is no need to discuss the reason, because of the objective fact that cryptocurrency system is open, the assumption of this single token model is actually meaningless.

On the other hand, in the currency standard, any node operator cannot measure the currency standard cost of node operation, because no one will accept the currency to sell servers and power -- cryptocurrencies have no legal compensation. Since the cost cannot be calculated, the return of the monetary-standard investment cannot be measured.

To sum up, the monetary standard and the return of the legal standard in the closed system are not calculable. Therefore, the expected return of node operators must be based on the standard of legal currency in the open system, that is, the speculative value of secondary market containing token.

Therefore, speculative demand is the necessary factor of the public chain economy, but also the fundamental motivation of node operation.

On cryptographic community

In bitcoin's early days, curiosity built communities. The ancient miners were driven by pure interest, and they had no thought of the expected returns; Since the early miners assumed that bitcoin would one day have a place in the world economy, the community's cooperation grew out of a consensus on value investing, and there was still a great deal of curiosity and idealism. The bitcoin community in these two stages is an impure profit-driven community with strong consensus.

Later, as the price of bitcoin soared, the community split in two: early holders paid far less to board than later entrants. The former insists that the value of bitcoin comes from the "store of value" and becomes a "preacher". The latter trades frequently and sees bitcoin as a "never-ending casino in the sky".

It is easy to understand that the advocates of a "store of value" are almost always vested interests on the low side -- since the total amount of bitcoin is limited. Due to the high purchase price, the latecomers cannot rely on the money to get rich, so it is difficult to have a sense of belonging to the "value store".

The same goes for ethereum, but with a difference: the community is more idealistic than the bitcoin community's now largely established consensus on "anti-inflation speculation." In other words, there's still a lot of exploration and curiosity in the ethereum community's cohesion, and that's part of the motivation that keeps the community from acting purely for profit a lot of the time. But as the first part concludes, ETH's speculative demand is a prerequisite for ethereum's existence -- the ethereum community doesn't want to talk about SoV, it has to talk about SoV.

In organizations,Selfish genes make people compete to develop individuals; Altruistic genes enable people to contribute to the development of groups; Curiosity drives people to explore new modes of production to expand the boundaries of existence. Any community of different size and closeness is formed by activating one or more of the three genes in different ways.

Edie, ethereum, and all tokens other than bitcoin are unlikely to form a viable community. Reason one, intelligent contract after block chain in essence not disruptive innovation, curiosity driven community cannot form, cold start problem too, ecology is generated only by foundation sustaining, lead to corporate community, which in turn inhibits creativity and cohesion of the group, but if you give enough money, that is community company two empty; The second reason is that if the interest binding method is used, the vehicle price of institutions and large investors is different from that of individual investors. Under the circumstance that the block chain technology can only achieve the speculative function at present, the two groups are fundamentally antagonistic. No matter how the distribution mechanism is designed, it will always break the face -- unless a new irrational frenzy is created. But in today's market, it's impossible to do that without disruptive innovation.

That is why there are only institutions and no retail investors in the encryption industry. The solution is to abandon the community and go to the dark side of corporatization.But apart from investing and selling COINS, it is impossible for such project parties to have any profit model。

When we are part of a broad encryption community, we first have to think about where we are and where we are going.

There are roughly three groups of people in the encryption industry. Second, curiosity-driven people often make altruistic contributions to the open source community, regardless of their philosophy or direction. The third, pretending to be the second, is actually the first.

According to the conclusion above. First, speculation within the rules is necessary to establish reasonable business models, such as mining and trading platforms; The third is the cancer of the industry, creating what outsiders see as the "cheater" label of the blockchain world.

The second group of people's ideas are currently divided into the following:

1. Decentralized finance (Defi)
Protect your privacy
3. Data confirmation
4. Decentralized Internet
V. new social governance paradigm (DAO)

The following is a critique of chimerical thinking that includes but is not limited to these five types.

Absolute power

Some of the fundamental misconceptions pervasive in the design of systems in the field of encryption are the assumption that no access is a form of equality, that absolute freedom is the ultimate means of efficiency, and that everyone is an extreme rational person.

Non-access and anti-censorship basically realize the absolute freedom of the block chain system: the full open use of the full open system. But absolute freedom means the emergence of absolute power. In PoW and PoS systems, resources come first and money comes second. In the design of the whole system, people as individuals have lost the meaning of existence, people without resources and money, without any power.

Encryption world designers tried to realize a kind of equality in this system, they think, "man" was born exist a kind of social rights and talent of inequality (this is any social organization form of disease), then you can design a new system, its power to anchor a average distribution of social material, the level of decentralization material need heavy grade is better than the real world.

But in the moment when life and time can be traded, in the moment when any single source can be copied indefinitely,Only the individual human life is truly equal: everyone has only one life, and no form of transaction or reproduction can transfer or generate ownership of life。

Any blockchain system that attempts to decentralize by anchoring resources is bound to become centralized because without anchoring the uniqueness of people, the whole system will become a complete jungle world.

It is generally believed in the blockchain world that in the system born of governance with "people" as the unit, there will inevitably be discrimination and censorship against people, but everyone has the power to fight for "a certain resource" and replace people with power, there will be no discrimination and censorship.

But the truth is: respect people, and the world will be more centralised slowly. In the system of anchoring resources, the gap of resource inequality still cannot be solved.

At the mining end, the average speculator can only be out of business or entrusted to a professional agent of the mine; On the trading side, where all the liquidity of a decentralised system is concentrated on centralised platforms below the chain, professional traders dominate the battlefield. Bitcoin, which prides itself on resisting censorship, can only be used to launder money and make up for off-chain speculation.

What's the problem?

Just because the consensus among bitcoin holders is:Bitcoin is priced in dollars as an anchor. In short, Mr Nakamoto's monetary vision is to create a decentralised commodity currency, creating a gold-standard commodity anchor as a means of payment. While a bunch of preachers of a currency revolution are hyping bitcoin in dollar terms,Therefore, the liquidity must be the center of the chainThis proves the total failure of commodity anchor and the total victory of credit currency.

In short, bitcoin has lost its value as a disruptive currency experiment after the failure of the currency standard. Today, the real players in bitcoin are the mining world and a bunch of traditional traders. After the total failure of the means of payment and the choice of commercialization, the use scenario of the anti-censorship feature of bitcoin is only criminal.

This fact suggests that centralised currencies and willing scrutiny are the result of a Shared choice by all - and that this has nothing to do with blockchain TPS.

Miners in PoW have to bear the exposure between the long-term investment costs of miners and short-term price fluctuations in the secondary market, while ordinary traders, faced with the expected constant selling pressure, have to accept this small inflationary cost or simply buy miners and switch to the other end of the game. However, in the current PoS system, a large number of tokens are in the hands of institutions, and if they are sold, they will cause stampeding. Therefore, Staking has become an inevitable choice when it is idle. At this time, the earnings of Staking almost depend on the price of the secondary market. Retail cut into the secondary market, the Angle of the current node in the PoS system for ordinary people is still not a simple matter, so cash is most can only silently bear bear this long-term inflation from the secondary market is slow, some of them will be tokens in the centralized trading platform current Staking service, but this kind of operation can only be the result of the under price risk at the same time be platform while a layer of Staking spreads the wool. If the current PoS is more like an alliance chain, then the bleak "retail" is undoubtedly the actual carrier of the chain's operation and maintenance costs.

If the current PoS system can be decentralized enough, there will be no fundamental difference between it and the game form of PoW in essence, only some differences in the speculative play on the node side. Such a system is like a shell state composed solely of commercial Banks and foreign exchange plates. However, ordinary people are not entitled to make deposits and earn risk-free profits. They can only go in and out of foreign exchange plates, while institutions can enjoy risk-free currency standard profits by sacrificing liquidity. The reality is that they will one day be able to flee, but it just depends on how many retail investors come in.

For all ordinary people, this is a cruel encrypted world, the myth of ordinary people can only come from the bones of more ordinary people later,Because these tokens aren't really useful as utility -- they don't have any real production requirements。

A possible change is that once such etheric lane 2.0 low threshold for the client to produce further evolution, under the hypothesis of ideal, ordinary people can be almost zero cost to Staking, at this point, the decentralized enough PoS will create an unprecedented seamlessly in the fundamentals and the secondary market game between low cost free switch the encryption of currency, the removal of mining, become real "casino air".

In essence, any cryptocurrency that is a "speculative commodity" depends entirely on the random input of speculative entrants. As far as you can see, after the mania for sudden wealth is over, the only reason to enter is the easy circulation of "anti-inflation" assets in the era of negative interest rates -- any token of waddling or complex and unclear mechanism for additional issuance will have no value.

Anchor, vulnerability and pure reason

As long as the dollar remains the anchor, the nature of Defi is a dangerous speculation by overdesign. It is important to know that the real liquidity of cryptocurrency does not exist in the chain, but in the centralized trading platform for legal currency swap. As a result,The predictor is the source of the dollar anchor。

This design attempts to split the trust process: instead of using the various financial instruments directly on the trading platform, Defi transfers the trust implemented by the tools to the open source code, leaving the offer to the trading platform, which monopolizes the pricing power of legal tender, with no interest. This mechanism of power and responsibility separation exposes huge system risks in both quotation and transmission, so it can only be centralized or introduce some complicated and redundant mathematical design. For example, Chainlink's main business is actually a centralized predictor, a platform business, and anyone who has an understanding of platform economy will find that the information source on the chain is a field that is expensive to find, but inevitably leads to long-term stable customer relationship, which is not platform economy at all. On the other hand, once a decentralized predictive machine design is introduced, all Defi will be like a building on a pin.

Another example is that Maker's mortgage casting model made it impossible to ever support large-scale use.

There is a metaphysical question in the field of blockchain design: is mathematical trust really reliable? The term "In math we trust" originated from the late famous physicist zhang shousheng. But in reality, it is economics, not mathematics, that underpins all blockchain systems.

Countless historical experience tells us that economics is not a transcendental science, but an empirical social discipline. In particular, economics is not always credible.

One of the myths of the blockchain world is the attempt to design a decentralized, full-stack Internet using purely economic incentives. It is a combination of financial means and Internet technology. Admittedly, in the classical computer world, the stack of complex protocols inevitably creates security holes, but because of the mechanical nature of the whole architecture, most things are based on pure rationality and therefore manageable.

However, when we introduce economic design into network security, the economic system that constructs the whole stack must bear the uncertainty caused by huge amount of human behavior. Although the economic and financial experience of the past has taught us a great deal, the lessons of 2008 have taught us that seemingly simple derivative designs, injected with complex human behavior, can turn into complex and fragile systems that no one understands. Protocols should be as simple as possible because humans are not Numbers.

Many people do not understand why modern centralized financial institutions: the birth of the modern financial world itself is a kind of games like building blocks of the stack (yes, this is Defi blocks cliche), the fragile complex mechanisms evolve to have strong robustness of complex systems is that the human on the rigid mechanism of the artificial repair. The low cost of money creation in double-entry bookkeeping in credit currencies and commercial Banks gives the system extraordinary flexibility. In short, centralised risk control collapsed by dropping money on helicopters or packaging toxic assets.

Some say too big to fail, but so what? Modern finance was never designed to be what it is today. The same goes for bitcoin.

Most bitcoin veterans from ancient times have shrugged off Defi because its disastrous ingenuity is not financial innovation of any kind. Finance is the allocation of capital and risk across time and space, and the issues that Defi advocates are trying to address, such as inclusive finance and cross-border financing, are not technical at all. Anyone with any knowledge of Defi, the dominant Defi in the market, can't help but wonder: are these things really Defi, or is it really possible to decentralize in the future?

What is an anchor?

Anchors are the management of expectations. Anchor is a kind of trust, trust brings stability, stability against risk, people in the system can live and produce normally. The anchor of the gold standard era was the absolute national strength guarantee for the convertibility of gold notes to physical gold, a mechanism that had been replaced by a central bank based on credit currencies because of its low operational flexibility. The anchor of central banking is stable inflation expectations, represented by the fed's 2 per cent target. Whatever the system, society will save, consume and invest normally only if it is guided by expectations of a stable anchor. The importance of managing inflation expectations is a valuable experience that mankind has learned from numerous lessons of blood and tears.

Countries need the fiat anchor, and the world needs the world anchor, and that anchor is the dollar. It is hard to believe that the world will always need a universal capital, but this universal anchor will only end in a slow death. Today, the side-effects of the world anchor, the hollowing out of industries and the current account deficit caused by huge deficits, have become a social problem that the United States cannot afford, so the dollar's role as the anchor of the world can only shrink.

With negative interest rates falling around the world, China is in the best position to slow the process, so Chinese government bonds will be a powerful weapon in the internationalisation of the renminbi. More importantly, as China's demand for commodities becomes dominant, the renminbi's anchor nature will emerge. In the future, a unipolar anchor world will evolve into a multipolar anchor, with deflationary assets such as cryptographic assets running through it.

In this light, Libra's stated ambition to create a stable basket of fiat currencies is to try to forge a digital currency from a traditional basket of virtual COINS, a converged multipolar anchor over the state.

Again, though, this is not a technical problem.

Data ownership

In broad discussions, privacy has always been tied to data ownership. We leave our data on free Internet services, so there is no privacy.

The first question is:Is privacy really an important Internet contradiction?

Many years ago, someone discovered a very simple principal contradiction in the vast countryside: farmers had no land, so farmers could not live. Therefore, the essence of China's industrialization lies in mobilizing the largest group of farmers.

At the time, others argued that the problem lay in the fact that Chinese industry was not good enough and that workers, the main industrial group, needed to be mobilized.

The result is well known: China embarked on the path of urbanization of agricultural energy-enabling industries, and this idea still guides China's extensive urbanization today.

Today, the Internet is ruled by the river inside and outside the five rings, giving birth to the concept of "sinking market". But even among the most sophisticated Internet consumers, I still don't see a raging privacy conflict. In fact, many Chinese have just started shopping online through pinduoduo.

In the old society, due to the production characteristic of relying on the weather for food, the self-employed lacked the ability to resist risks. Therefore, landlords took risks without working, while peasants worked away from risks. In recent history, China had the necessary conditions for an agrarian revolution, as years of war and chaos at the grassroots level had led to the complete collapse of the risk system in rural society (small societies often have limited capacity to resist risk). As a result, in the reconstruction of society, a system of absolute centralism took over the autonomy of the grassroots, spreading the risks of the bottom to the whole society and continuing to this day.

The premise of this revolution is that a self-organizing social production can survive. As demonstrated above, the full-stack decentralized Internet is a logical monster that violates the system design principles. Moreover, today's centralized Internet brings not only standardized technical resources, but also a whole set of services and offline industries. Blockchain people often want to build the "new generation of xx platform", which itself is still a big platform in the era of Internet traffic. They want to create a big center, reap a big dividend, and raise the flag of righteousness with greed, doomed to failure. As a result,When only large, centralised companies can provide such services, you have no choice about whether to use them or not, unless you don't。

On the other hand, much of the demand for power comes from participation in production, and in fact, as with many NFT tokens that are attached to services and cannot be truly decentralized, data is generated by services rather than by users themselves. In other words, the land and means of production of the data are in the hands of the service providers, while the users can only be regarded as an undifferentiated labor force. Regardless, for the vast majority of Chinese users, the more important issue is how to use more basic Internet services, rather than meeting the need for data validation that doesn't exist. Even if there is a real need to regulate data privacy, there are other ways to fight it: national legislation to regulate Internet giants, for example, or a boycott of evil giants organized online.

There is, of course, another idea, which is to localize the data, or to block the application's data grab by encryption. Since most Internet applications in China are free to use, this approach directly confronts the fundamental interests of service providers. There are only two options, either charging for all apps or getting bogged down in endless battles of wits and legal wrangling with service providers.

Losing the free is obviously impossible.

Governing what?

There is a lot of long-winded information about daos. But when you turn on the Aragon and look at it, the question is: what am I doing?

When you look at DAO, the only innovation you'll find is the use of a mouse for shareholder voting, and often you won't understand why.

Based on the characteristics of blockchain automation and transparency, DAO is believed to expand the scope and improve the transparency of governance. But first, the Internet is now connected to much of the world, so the question of governance is not a technical one. By the same token, why can't transparency in the real world be 100%? Again, this is not a technical problem.

First of all, the transparency on the chain can only be the transparency of the data system, the implementation of the business does not guarantee the transparency. Second, the disclosing party is the producer of the information most of the time, and unless there are mandatory legal requirements, transparency on the chain does nothing to constrain them.

Blockchain is considered as a tool to optimize human collaboration, but in essence, it has no innovation in the breadth, depth or mechanism of collaboration: no matter how big the boundaries may be, only stakeholders will participate in governance; No matter how deep the collaboration is, there is only one auto-executed script on the chain (can a trial-and-error script be called governance?). ; Whether the participants are anonymous or not does not resolve the tension between fairness and freedom. Further,"To be seen by all" and "to be seen by all" are completely different things. In today's world, information is not a matter of whether it can be seen, but whether it can be seen, and it is a matter of the cost of information delivery and acquisition. The scary thing is that the chain does not reduce either of these costs.

So why do so many believe that blockchain has the potential for a new type of governance and organization?

This comes from the fact that bitcoin can exist in a decentralized environment. Until recently, no software in the world could exist without a centralized server. Through abstraction, the bitcoin code guides two governance principles:Quantifiable absolute competition and voting with feet. Can only calculate the fastest people are rewarded, everyone has the right to claim the chain chain is legal, but the secondary market of the cash transaction price is the chain for the men to vote with their feet - currency price of the highest chain migration, and safety of the collapse and form a consensus: the more miners chain people more recognition, recognition of chain miners more and more people.

The popularity of gold was also a vote of the foot, so the mechanism is not innovative. The real core of bitcoin decentralization lies in:The man with the biggest fist is only legal. This thorough useQuantifiable violenceFor standardAbsolute powerNever before in human history. This is indeed an innovation, but no one in his right mind would expect such governance to become mainstream.

The PoS system is mostly legal in the mortgage token, which is also no governance innovation. The minority is subordinate to the majority.

On both sides of the road

For many years, the cryptographic community has languished in search of something to write on an untamable stone. Slowly, people began to despair in the futility of day after day.

A handful of people realize that something simple and ubiquitous, available and visible, called money, is the ultimate destiny of the stone.

In years of exploration, another group of people calling themselves the chain of alliances has found other paths that might lead to enterprise software and the industrial Internet.

As the years go by, these old cryptographers may look back and smile at how they used to hold a rock and force people to write on it.

Money is money and chain is chain.

Maybe this is the blockchain 2020.